Justia Business Law Opinion Summaries

Plaintiffs, who own or operate gasoline service stations in Puerto Rico, offered two different prices to consumers: a higher price for those using credit or debit cards and a lower price for those paying with cash. In 2013, Puerto Rico's legislature enacted Law 152-2013, amending Law 150-2008 by removing a provision that allowed merchants to offer cash discounts. Plaintiffs ceased offering the lower price due to the threat of fines and criminal prosecution. They sued the Commonwealth of Puerto Rico, arguing that Law 150 is preempted by federal law and is unconstitutionally vague.The United States District Court for the District of Puerto Rico rejected the plaintiffs' arguments and granted the Commonwealth's motion to dismiss for failure to state a claim. The court found that neither the Cash Discount Act (CDA) nor the Durbin Amendment preempted Law 150. The court also declined to address the constitutional vagueness argument, noting that the complaint did not allege that Law 150 is unconstitutionally vague.The United States Court of Appeals for the First Circuit reviewed the case. The court held that the CDA and the Durbin Amendment do not preempt Law 150. The CDA regulates the conduct of credit card issuers, not merchants or states, and does not confer an absolute right to offer cash discounts. The Durbin Amendment regulates payment card networks, not states, and does not preempt state legislation restricting cash discounts. The court also found that the plaintiffs did not properly plead a vagueness claim in their complaint, rendering the claim unpreserved for appellate review. Consequently, the First Circuit affirmed the district court's dismissal of the case. View "Asociacion de Detallistas de Gasolina de PR Inc. v. Commonwealth of Puerto Rico" on Justia Law

The case involves an enforcement action by the U.S. Securities and Exchange Commission (SEC) against Gregory Lemelson and Lemelson Capital Management, LLC. The SEC alleged that Lemelson made false statements of material fact, engaged in a fraudulent scheme, and violated securities laws, resulting in approximately $1.3 million in illegal profits. The SEC sought disgorgement of these profits, a permanent injunction, and civil monetary penalties. Lemelson moved to dismiss the complaint, and the district court dismissed one of the challenged statements. The SEC filed an amended complaint, and the jury ultimately found Lemelson liable for three statements but rejected other claims.The District Court for the District of Massachusetts held Lemelson in contempt for violating a protective order and threatening a priest who provided information to the SEC. After the jury verdict, the district court issued a final judgment, including a five-year injunction against Lemelson and a $160,000 civil penalty. Lemelson appealed, and the United States Court of Appeals for the First Circuit affirmed the district court's judgment. Lemelson then moved for attorneys' fees and costs under the Equal Access to Justice Act (EAJA), arguing that the SEC's demands were excessive compared to the final judgment.The United States Court of Appeals for the First Circuit reviewed the district court's denial of Lemelson's motion for fees and costs. The appellate court found that the district court incorrectly compared the SEC's demand to the scope of the initial claims rather than the final judgment obtained. The appellate court vacated the denial of fees and costs and remanded the case for further proceedings to determine whether the SEC's demands were excessive and unreasonable compared to the final judgment. The appellate court also noted that the district court should consider whether Lemelson acted in bad faith or if special circumstances make an award unjust. View "Securities and Exchange Commission v. Lemelson" on Justia Law

In 2023, James Broad and Rebecca McCrensky began operating a car-rental agency, Becky's Broncos, LLC, on Nantucket Island without the necessary local approvals. The Town of Nantucket and the Nantucket Town Select Board ordered Becky's to cease operations. Becky's sought preliminary injunctive relief in the District of Massachusetts to continue their business.The District Court for the District of Massachusetts denied Becky's request for a preliminary injunction. The court found insufficient evidence of discriminatory effect under the dormant Commerce Clause and concluded that Becky's had not demonstrated a likelihood of success on the merits of its claims. Becky's appealed the decision.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's denial of the preliminary injunction. The appellate court held that Becky's did not show a likelihood of success on the merits of its dormant Commerce Clause claim, as the ordinance did not discriminate against out-of-state businesses. The court also found that Becky's failed to establish a likelihood of success on its antitrust claims due to a lack of a concrete theory of liability. Additionally, Becky's procedural due process argument was rejected because it did not establish a property interest in the required medallions. Lastly, the court held that the ordinance survived rational basis review under substantive due process, as it was rationally related to legitimate government interests in managing traffic and congestion on the island. View "Becky's Broncos, LLC v. Town of Nantucket" on Justia Law

The plaintiffs, representing nine closed-end mutual funds, sued Ocean Capital LLC and several individuals and firms for allegedly committing securities violations. The plaintiffs claimed that the defendants misled their shareholders by failing to make complete and accurate disclosures, violating Sections 13(d), 14(a), and 20(a) of the Securities and Exchange Act of 1934 and other applicable SEC rules. The district court granted the defendants' motions for judgment on the pleadings and to dismiss, leading the plaintiffs to appeal.The United States District Court for the District of Puerto Rico initially reviewed the case. U.S. Magistrate Judge Giselle Lépez-Soler recommended dismissing the plaintiffs' complaint on grounds of failure to state a claim and mootness. The district court adopted this recommendation, dismissing the plaintiffs' claims but retaining jurisdiction over the defendants' counterclaims. The plaintiffs then moved for a stay of the proceedings on the counterclaims, which was denied. The district court granted the defendants' requested relief on their counterclaims, ordering the plaintiffs to seat the defendants' nominees for the board of directors of three funds. The plaintiffs timely appealed these decisions.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's dismissal of the plaintiffs' Sections 13(d), 14(a), and 20(a) claims. The court found that the plaintiffs failed to state a Section 13(d) claim for the non-PRRTFF IV funds and did not demonstrate irreparable harm for PRRTFF IV. The court also concluded that the plaintiffs' Section 14(a) claims were insufficient, as the statements in question were not materially misleading. Consequently, the court upheld the district court's judgment on the defendants' counterclaims, ordering the plaintiffs to seat the defendants' nominees. View "Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc. v. Ocean Capital LLC" on Justia Law

The Securities and Exchange Commission (SEC) brought a civil enforcement action against Commonwealth Equity Services, LLC, alleging that from 2014 to 2018, Commonwealth failed to adequately disclose potential conflicts of interest related to its revenue-sharing agreement with National Financial Services, LLC (NFS). The SEC claimed this omission violated Sections 206(2) and (4) of the Investment Advisers Act of 1940 and SEC Rule 206(4)-7. Commonwealth's representatives, who provided investment advice to clients, were unaware of the revenue-sharing arrangement, which the SEC argued created a conflict of interest by incentivizing Commonwealth to direct clients to higher-cost mutual fund share classes that generated revenue-sharing income.The United States District Court for the District of Massachusetts granted the SEC's motion for summary judgment on liability, finding that Commonwealth's disclosures were inadequate as a matter of law and that the firm acted negligently. The court also denied Commonwealth's cross-motion for summary judgment and its motion to reconsider. Subsequently, the district court entered final judgment against Commonwealth, ordering disgorgement of $65,588,906 in revenue-sharing income, $21,185,162 in prejudgment interest, and a civil penalty of $6,500,000. The court struck Commonwealth's expert declaration proposing an alternative disgorgement calculation and adopted the SEC's proposed amount.The United States Court of Appeals for the First Circuit vacated the district court's grant of summary judgment and the disgorgement order, remanding for further proceedings. The appellate court held that the issue of materiality should have been decided by a jury, as reasonable minds could differ on whether the additional disclosures would have significantly altered the total mix of information available to investors. The court also found that the SEC had not adequately shown a reasonable approximation or causal connection between Commonwealth's profits and the alleged violations, and that the district court must consider whether Commonwealth is entitled to deduct its expenses from any disgorgement awarded. View "Securities and Exchange Commission v. Commonwealth Equity Services, LLC" on Justia Law

The case involves a business venture between W.R. Cobb Company (Cobb) and V.J. Designs LLC (VJ Designs) to sell diamond products under the Forevermark brand. Cobb, unable to secure a license directly from Forevermark, entered into an agreement with VJ Designs, an existing Forevermark licensee, to form a new company, WR Cobb/VJ LLC (the Joint Entity). The agreement stipulated that the Joint Entity would operate under the Forevermark license. However, VJ Designs could not transfer its Forevermark rights without Forevermark's written consent. The venture quickly fell apart, and Cobb sued VJ Designs and its owner, Benjamin Galili, to recover funds paid under the agreement, alleging breach of contract and misrepresentation.The United States District Court for the District of Rhode Island held a two-day bench trial and ruled in favor of VJ Designs and Galili on all claims. The court found that VJ Designs did not breach the contract or misrepresent any material facts. Cobb appealed, arguing that the district court erred by not rescinding the agreement and not holding Galili personally liable for fraud and misrepresentation.The United States Court of Appeals for the First Circuit reviewed the case. The court affirmed the district court's judgment, holding that VJ Designs did not breach the contract by failing to assign the Forevermark license to the Joint Entity upon execution of the agreement. The court found no provision in the agreement requiring immediate transfer of the license and noted that the parties understood Forevermark's consent was necessary. The court also rejected Cobb's claims of fraud and misrepresentation, finding no evidence of material misrepresentation by VJ Designs or Galili. Additionally, the court dismissed Cobb's mutual mistake theory as it was not pled in the complaint and was raised too late in the proceedings. View "W.R. Cobb Company v. VJ Designs, LLC" on Justia Law

The case involves a civil enforcement action by the Securities and Exchange Commission (SEC) against Henry B. Sargent for allegedly violating registration and antifraud provisions of federal securities laws. The district court granted partial summary judgment to the SEC, finding that Sargent violated section 5 of the Securities Act of 1933 by directing unregistered public offerings of penny stocks. The court ordered equitable remedies, including disgorgement and a ten-year ban on trading penny stocks, but dismissed the SEC's fraud claims and denied an additional civil penalty.Sargent appealed the partial summary judgment, arguing that his transactions were exempt from registration and that the district court abused its discretion in imposing the ten-year ban and calculating the disgorgement amount. The SEC cross-appealed, contending that the district court erred in not imposing a civil penalty and in dismissing its fraud claims.The United States Court of Appeals for the First Circuit affirmed the district court's grant of partial summary judgment, the disgorgement amount, and the dismissal of the SEC's fraud claims. However, it found that the district court erred in imposing equitable remedies and in concluding that it lacked the power to issue a civil penalty. The appellate court vacated the injunction against Sargent and remanded the case for further proceedings to assess the appropriateness of injunctive relief and civil penalties for Sargent's section 5 violation. View "Securities and Exchange Commission v. Sargent" on Justia Law

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), enacted in 2016 to address Puerto Rico’s financial crisis, provides for a temporary stay of debt-related litigation against the Puerto Rico government. The statute, however, allows creditors to move for relief from the stay and directs courts to grant such relief “after notice and a hearing…for cause shown.” Movant Peaje Investments LLC and various appellants in Altair Global Credit Opportunities Fund (A), LLC v. Garcia-Padilla (the Altair Movants) filed lift-stay motions. The First Circuit (1) affirmed the district court’s denial of the Peaje Movant’s motion, holding that Peaje failed to set forth a legally sufficient claim of “cause” to lift the PROMESA stay; and (2) the Altair Movants presented sufficient allegations to entitle them to a hearing. View "Peaje Investments LLC v. Garcia-Padilla" on Justia Law

Tutor Perini Corporation, a giant construction company, sued Banc of America Securities LLC (BAS) and Bank of America, N.A. (BANA), alleging that BAS, acting as its broker-dealer and with BANA’s knowledge and acquiescence, sold Tutor Perini auction-rate securities (ARS) without disclosing that the ARS market was heading for a crash. Tutor Perini filed suit in Massachusetts’s federal district court, alleging securities fraud under state and federal law and several other state-law claims. BAS and BANA moved for summary judgment on all claims, claiming that BAS actually disclosed the risks that later materialized. The district court granted BAS and BANA’s motion. The First Circuit (1) vacated the summary judgment for BAS on the state securities-fraud claim, the federal securities-fraud claim, the state negligent-misrepresentation claim, and the state unfair-business-practices claim, holding that genuine issues of material fact existed as to these claims; and (2) affirmed in all other respects. Remanded. View "Tutor Perini Corp. v. Banc of America Securities LLC" on Justia Law

Evergreen Partnering Group, Inc. processed used polystyrene products into a recycled polystyrene resin, which it sold to converters to use in a “green foam” line of products. Evergreen sued Defendants - the five largest converters of polystyrene products and a trade association - arguing that Defendants illegally agreed to refuse to deal with Evergreen in order to prevent polystyrene recycling from becoming viable and to maintain their market positions. The district court entered summary judgment in favor of Defendants, concluding that Evergreen failed to present evidence that tended to exclude the possibility that each polystyrene manufacturer independently chose not to partner with Evergreen as required by caselaw. The First Circuit affirmed, holding that no genuine issue of material fact existed as to whether there was a conspiracy. View "Evergreen Partnering Group v. Pactiv Corp." on Justia Law